Policy —

Cuban a little too maverick for SEC

Mark Cuban faces insider trading charges

Billionaire entrepreneur Mark Cuban is facing insider trading charges filed by the Securities and Exchange Commission, which alleges that Cuban exploited non-public information to sell off shares in meta-search engine Mamma.com, avoiding some $750,000 in losses. Cuban hits back in a short post on his blog:

I am disappointed that the Commission chose to bring this case based upon its Enforcement staff’s win-at-any-cost ambitions. The staff’s process was result-oriented, facts be damned. The government’s claims are false and they will be proven to be so.

Blogger and UCLA biz-law prof Stephen Bainbridge has a first-pass analysis, and deems the SEC's case "pretty good," but says the critical point will be whether Cuban "assumed a fiduciary obligation of confidentiality with respect to Mamma.com."

Put another way, assuming the basic facts SEC alleges are right—that Cuban dumped his shares in advance of a public offering on the basis of confidential information—then the case will turn on whether the confidentiality agreement was sufficient to turn Cuban, who isn't an agent or employee of the company, into an "insider." Bainbridge thinks it shouldn't be, but notes that he courts might well disagree.